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3.4.3 Redemption of Debentures

Debentures may redeemed at the issue or face value, below or above the issue value.
The financial reporting standards require the discounts and premiums to be amortized over the

loan term if they were measured at amortized costs.
On redemption date the company will discharge the liability. Where a liability instrument is

redeemed, there is no requirement to replace the liability.

3.4.4 Convertible Loan Stocks

Convertible loan stocks and debentures are referred to as compound instruments. There
have features of both liability and equity. The proceeds of the issue of the convertibles are split

between the equity and liability components, which are determined on the issue of these

compound instruments.
For instance, if the proceeds of the convertible loan instrument are 20 million and the liability

component is calculated to be RM18 million, then the equity is the residual amount of RM2
million.

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